ECONOMICS UNIT 3 Types of Businesses Mr Phinizy

ECONOMICS UNIT 3 – Types of Businesses Mr. Phinizy / Ms. Staker (by MR. NOVOTNI)

Sole Proprietorships n Sole Proprietorship – business owned and run by ONE PERSON. n S. P. can have many employees, but are still only owned by one person.

Sole Proprietorships n STRENGTHS: 1. 2. 3. Don’t have to share your profits Don’t have to pay business taxes You are your own boss!

Sole Proprietorships n Weaknesses: 1. 2. 3. Owner has unlimited liability Difficult to raise $ to start a business Limited life – when owner quits, firm is done “Who’s gonna take care of all this money when I’m gone? ”

LIABILITY n Limited Liability: You can only lose what you started out with ($) n Partnership, Corporation n Unlimited Liability: You are legally bound to pay debts of your business n Sole Proprietorship

LIFE n Limited Life: Once an owner quits, dies, etc. , the business dies too n Sole Proprietorship, Partnership n Unlimited Life: The business goes on even if someone leaves. n Corporation

PARTNERSHIPS n Partnership: business owned by 2 or more persons n n General Partnership: all partners are responsible for keeping the business going; finances Limited Partnership: At least one partner is not active in the daily running of the business.

Partnerships n STRENGTHS: 1. Limited Liability 2. Different talents 3. Partnerships get money easier than sole proprietorships

PARTNERSHIPS n WEAKNESSES: 1. 2. 3. Each partner is responsible for acts of all other partners. Limited life Potential conflict between partners

CORPORATIONS n Corporation: a big business recognized by law as having the same rights of an individual n To form a corporation – you must ask for permission from government n If approved, you receive a charter: gov’t document giving you permission to create your corporation

CORPORATIONS n STRENGTHS 1. Easy to raise money – sell stock and bonds § Bonds: written promise by corp. to repay a person for an amount borrowed at a later date (plus interest)

CORPORATIONS n Corporations have stockholders / shareholders: investors in a corporation. n Stock: ownership of part of the business

CORPORATIONS STRENGTHS: (CON’T) 2. Can hire best management / talent 3. Limited liability for owners. 4. Unlimited life: business continues to exist even when ownership changes

5. Easy to transfer ownership – can sell your stock, leave the business

CORPORATIONS n n n WEAKNESSES: Difficult / expensive to get a charter Shareholders have little say in how the business is run (Board of Directors) Business must pay income taxes